Our opinion: 'Inequality for all'

Posted:
10/15/2013 03:00:00 AM EDT

The richest 400 people in America have more wealth than the poorest 150 million Americans.

If that's not enough to make you pause over your cup of coffee or tea this morning, think about this: The distance between the rich and the poor is greater in the United States than in nearly all other developed countries.

One report notes that between 1966 and 2011, the income of the bottom 90 percent grew only by $59, adjusted for inflation, while the income for the top 10 percent grew by $116,071.

And as for that great economic ladder we are promised is part of the American Dream? Well, 42 percent of Americans born into poverty will not make their way out.

"We are paying a very high price for this inequality -- our economy is less productive and efficient," Nobel Prize-winning economist Joseph Stiglitz told the Global Post, a web resource that has made as its mission the study of income inequality. "We are also paying a price in terms of our politics and our society -- inequality is undermining our democracy and our basic values."

While most Americans recognize income inequality around the world in places such as Thailand, Brazil and Bangladesh, many of us are blind to our own reality.

"Thailand's inequality almost exactly matches that of Fairfield County, Connecticut," notes Charles Sennott, the co-founder of the Global Post. "Brazil's is remarkably close to that of Selma, Alabama.

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It is true that on a global basis, Americans, even many of our poorest, are the 1 percent of income earners. But many of us are not better off than our parents, the benchmark that we have been led to believe signifies the promise of the American Dream. In fact, for many of us, our economic reality is worse than it was for our parents and grandparents who came of age in the 1950s and 1960s.

In a study conducted by Emmanuel Saez, of Berkeley, and French economist Thomas Piketty, the middle class did quite well following World War II until 1980. Since then, median wages have remained flat and the income of the top 1 percent has grown to about 23 percent of the entire pie.

"Unlike the ‘Leave it to Beaver' generation that enjoyed prosperity, growth and opportunity in the quarter-century after (World War II), today's middle class suffers from a prevailing malaise, marked by declining wealth, rising debt, stagnant wages, and a mounting angst about their prospects," wrote David Case for Global Post.

In "Inequality for All," a documentary featuring Robert Reich, a former Secretary of Labor and current professor of public policy at the University of California Berkeley, Reich maintains that income inequality is bad for everyone, and not just those at the bottom of the pile.

"A lot of people feel the game is stacked against them, and losers in rigged games get angry," says Reich in the documentary. "We are losing equal opportunity in America, our moral foundation stone."

Reich also takes on the right-wing and Tea Party notion that the wealthy are job creators, pointing out that consumer spending is 70 percent of the U.S. economy. The real job creators, contends Reich, are the members of the middle class who spend their money on consumer goods and services and keep the economic wheels greased and turning.

To reinforce his point, Reich brings along a cast of characters in his documentary, including Nick Hanauer, a millionaire whose initial family business was in making pillows.

"A person like me doesn't buy 1,000 pillows," Hanauer says in the film. "Even the richest person sleeps on only one or two. The most pro-business thing you can do is to help middle-class people thrive."

But we've been living in an age of denial since 1980, says Reich.

In an interview with New York Magazine, Reich said Americans have been using a variety of "coping mechanisms" to forestall the reality of stagnating wages for the middle class.

"One was putting women in the workforce," he said. "The second mechanism was everyone working longer hours. And then, finally, we borrowed against the rising value of our homes. Now the interesting thing is that every one of those coping mechanisms is now exhausted."

Reich said the United States needs to do six things if it truly wants to address income inequality.

On his crusade to bring attention to income inequality, Reich has been the subject of much approbation, especially from the right. One Fox News bully has called him a communist but Reich insists he is not anti-Capitalist, he is Keynesian, in that he would like taxes raised on the rich with the money spent to rebuild infrastructure thus providing middle class jobs. Many on the left don't think Reich's prescription for change goes far enough.

"He points out that the decline of the middle class exactly corresponds with the deunionization of the US, but labor unions will probably not be coming back any time soon due to the facts of globalization and robotization," wrote John Lawrence for the Sand Diego Free Press. "American workers do not have any leverage for jobs that can either be shipped overseas or roboticized. Unions were able to bargain for better wages when the corporations really needed them in the period 1945-1980. They don't really need them now."

"Reich doesn't talk about economic democracy or the cooperative movement in the world today. He doesn't take on Wall Street or suggest public banking as an alternative. He seems to long for the good old days when taxes on the rich were high and good union jobs were plentiful. But that doesn't address the present day situation."

Shah Gilani, writing for Forbes, notes that the current and past presidents are all guilty of not taking from the rich and giving to the increasing ranks of the poor, but taking from the middle class to give to people just like them who are sliding deeper into financial dysfunction. Not only that however, because of the way capital gains are taxed, the government is also taking from the middle class to give to the rich, he noted.

"If looked at objectively, fixing income inequality has nothing to do with taking from the rich and giving to the poor," wrote Gilani. "It has everything to do with creating a fair tax system, which means moving to a simple but slightly progressive flat tax system and creating an increasingly progressive capital gains tax regime."

Gilani maintains that as long as the tax code favors the wealthy by giving them "alternatives that allow them to shift ‘income' into vehicles taxed at preferential capital gains and marginal rates, the income inequality gap will continue."

This is bad news for America, despite which end of the political spectrum you are on. As Gilani notes, if changes to the tax system are not made and we continue to see an increase in education costs for degrees that mean less and less on the marketplace, we are headed for another "Dust Bowl."

But does anyone really expect that Congress as it is presently constituted will address the heart of the issue while it argues about red herrings such as the Affordable Care Act, the debt ceiling and the deficit?

We here at the Reformer don't hold out much hope that our country's arcane tax system will be fixed anytime soon. And even if Congress does take it under its wing as a pet project, you can bet that lobbyists and their shadow paymasters will do their best to subvert a fair and equitable tax code that would benefit the middle class at the expense of the uber-wealthy.

Call us cynics, but cynicism is one thing we in the middle class have an excess of.

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